- ECB’s Isabel Schnabel warned stablecoins could strengthen dollar dominance globally.
- Digital euro remains central to Europe’s response against risks.
- Coinbase urged MiCA reforms to improve stablecoin competitiveness regionwide.
European Central Bank board member Isabel Schnabel has warned that stablecoins could cement the U.S. dollar’s dominance across Europe if their adoption continues expanding at the current pace. According to Schnabel, the growing influence of dollar-backed stablecoins presents risks not only to financial stability but also to Europe’s monetary autonomy.
Speaking at the 2026 Bank of Korea International Conference in Seoul, Schnabel said nearly all major stablecoins are denominated in U.S. dollars. As a result, their wider use could strengthen the dollar’s position in global finance and increase the international reach of U.S. monetary policy.
According to Schnabel, the global stablecoin market has grown to almost $300 billion, although growth has moderated recently. Tether’s USDT and Circle’s USDC continue dominating the sector, accounting for roughly 90% of the market. Consequently, she warned that the increasing use of these assets could reinforce existing network effects that already favor the dollar.
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Stablecoin Risks Extend Beyond Currency Competition
Beyond concerns about dollar dominance, Schnabel said stablecoins could create broader financial stability risks. She explained that stablecoin issuers face liquidity mismatches between reserves and redemption demands. Therefore, a loss of confidence in reserve assets could trigger large-scale withdrawals.
Additionally, Schnabel noted that stablecoins remain vulnerable to runs during periods of market stress. Such events could spread instability across the financial system if safeguards are insufficient.
Despite these concerns, she stressed that policymakers should not oppose innovation. Instead, regulators should establish rules that allow innovation while preserving trust in currencies and payment systems.
Digital Euro Seen as Europe’s Strategic Response
Schnabel argued that the digital euro would play a crucial role in addressing these challenges. According to her remarks, a retail central bank digital currency would preserve citizens’ access to public money while reducing Europe’s dependence on foreign payment providers.
Moreover, she said a digital euro could support a unified European payments infrastructure and reduce fragmentation across the region. The ECB is currently preparing the project and aims to be ready for a possible issuance by 2029 if legislation advances in 2026.
Meanwhile, Coinbase Director of International Policy Katie Harries called for targeted changes to the European Union’s Markets in Crypto-Assets framework. Harries said regulators should make euro stablecoins more competitive while providing clearer guidance for decentralized finance and tokenization initiatives.
She also criticized reserve requirements that require stablecoin issuers to hold significant portions of reserves in commercial bank deposits. According to Harries, allowing greater exposure to high-quality sovereign assets could reduce systemic vulnerabilities without compromising safety.
In conclusion, Europe’s stablecoin debate is increasingly focused on monetary sovereignty. As adoption grows, policymakers continue weighing how to support innovation without strengthening the dollar’s influence across the region.
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